Retailers, wholesalers, and seasonal businesses can benefit from inventory financing. Inventory financing can help businesses meet customer demand without interrupting cash flow. However, it may be tough for small businesses to qualify for inventory financing. The good news is there are several inventory financing lenders and several inventory financing alternatives. To qualify for most types of inventory financing businesses should have at least one year in business, sales history, and a reliable inventory system. As a business owner you may be wondering what types of inventory financing are available. Keep reading to learn more about inventory financing alternatives.
What are your financing alternatives to fund your inventory expansion needs?
Businesses need access to capital in order to thrive. Even well established, successful businesses may need inventory financing. Inventory financing can help companies ensure they have product available and healthy cash flows. In addition, inventory financing can help businesses overcome seasonal sales spikes. Tying up available cash to purchase inventory can cause cash flow problems. Inventory financing is often assumed to be easy to secure. However, for small business inventory financing may be challenging to secure. It’s important for small business owners to know what inventory financing options are available and select the option they are most likely to qualify for. Let’s explore financing alternatives that can fund inventory expansion needs. . .
Businesses and charities can raise money for inventory financing using crowdfunding. Individuals and organizations can create campaigns that investors can choose to invest in. Crowdfunding allows individuals and organizations to pool together multiple investors’ money. So what’s in it for investors? Investors make money on the interest you pay on the loan. In addition, investors may require stake or equity in your company. Most crowdfunding platforms charge fees for raising funds, which can add up quickly. Kickfurther takes a unique approach to crowdfunding that allows individuals and organizations to create campaigns and investors to purchase inventory on consignment. Kickfurther allows businesses to get the funding they need without giving up equity.
Bank loans can provide business owners with a lump sum of cash that can be used for business financing. In some cases, it can take 1-3 months to complete the application process for a bank loan. For small businesses and startups, it may be challenging to qualify for a bank loan. In most cases, banks will request collateral or a personal guarantee. Before applying for a bank loan you should make sure you meet the basic requirements. Banks usually have requirements for businesses such as time in business and proven sales. If you can qualify for a bank loan it’s likely that you can secure a competitive fixed interest rate with predictable monthly payments. As an added bonus, you will have access to a professional banker that is familiar with your business and can provide advice.
Personal loans are often used for inventory financing. If you are a small business owner or startup entrepreneur, you may be desperate to secure inventory financing. If you are tired of not meeting basic requirements and being denied time after time for a business loan, you may want to consider a personal loan. Personal loans do not require collateral and are usually easy to secure. In addition, business owners with less than perfect credit should be able to qualify for a personal loan. However, compared to bank loans, crowdfunding, or Kickfurther, personal loans may have higher interest rates.
While credit cards can be used for inventory financing, they may not be the best option. If you are confident that you can turn inventory extremely fast, you may be able to justify using a credit card for inventory financing. However, when double digit interest rates are applied to your credit card balance, the cost of your inventory can go way up. The purpose of an inventory loan is to help your business be more profitable. Regardless of the type of inventory financing you choose, there will most likely be interest and other fees. However, as a business owner you should do everything in your power to find an inventory financing option with the lowest possible fees.
Line of credit
In some cases, businesses may qualify for a line of credit that can be used for inventory financing. An inventory line of credit is usually issued by a bank or credit union. It’s similar to a credit card but should have a lower interest rate. When you are approved for a line of credit, you will have access to a specified amount of capital. For example, if you have an $80,000 line of credit and you use $50,000 of it, you’ll have access to $30,000 until you pay back the $50,000 you borrowed. Once you repay the $50,000 you borrowed you should have access to the full $80,000 again.
What is the least costly way to finance an inventory?
In most cases, bank or term loan, a line of credit, or some type of crowdfunding should be the cheapest way to finance inventory. However, if you can pay cash for inventory it will be the ultimate cheapest. Financing inventory comes along with additional fees but that’s just part of doing business. As a business owner it’s important to account for increased cost to make sure you are operating at acceptable margins. When choosing inventory financing you should take into account what it will cost.
Which type of financing is most appropriate to finance purchase of inventories?
If you need to finance the purchase of an inventory or replenish inventory, you should use inventory financing. While there are different types of inventory financing, they all share the same concept – borrowing money to purchase product. Depending on your business model, the type of inventory financing that is best can vary. For example, if you turn inventory quickly and can’t stock too much inventory at a time, a line of credit may be best. Alternatively, if you sell inventory quickly but can keep a good amount stocked, a term loan or inventory financing platform may be best.
Grow your business with Kickfurther
Inventory financing can be expensive, thus driving business owners to explore other options. Our model routinely delivers lower costs than competing platforms on terms that provide superior flexibility tailored specifically to each individual business’s cash-flow timeline where no payments are due until newly funded inventory begins selling and revenue lands without giving up equity in the company.
With 800+ deals funded, we’ve proven to be a flexible inventory financing solution for growing businesses. Our customers often see lower costs than available from other solutions and access payment terms that offer superior flexibility. Our CEO Sean De Clercq is an entrepreneur who also struggled to find sufficient funding for his growing business and created Kickfurther to help solve this problem for other entrepreneurs.